Italy on a knife-edge as election nears end

Italy held its final day of campaigning on Friday ahead of crucial elections, as international investors warned an unclear outcome could shake the economy and set off shockwaves through the eurozone.

Italians will cast their ballots on Sunday and Monday as they grapple with the longest recession in two decades and austerity cuts that have caused deep resentment in the eurozone's third-largest economy.

The most likely outcome is a center-left government led by Democratic Party leader Pier Luigi Bersani, who has a down-to-earth manner and now espouses broadly pro-market economic views.

"I am very, very confident of victory although we should not underestimate the right," Bersani said in one of his last television interviews ahead of Saturday, when no campaigning is allowed.

But the result is by no means certain and whether Bersani can form a stable coalition with a majority in both houses of parliament is in serious doubt, putting financial markets on edge.

Bersani's rival Silvio Berlusconi will address a rally in Naples.

London-based Capital Economics warned that even with a stable governing majority "huge underlying economic problems suggest that it may only be a matter of time before concerns about public finances begin to build again".

The economic research company said this week, "A hung parliament might plunge Italy and the eurozone back into crisis."

Polls open early on Sunday before a second day of voting on Monday. Preliminary results will begin to trickle through late on Monday and into Tuesday.

The wild card in the election will be Beppe Grillo, a tousle-haired former comedian whose mix of invective and idealism has appealed to crowds of protest voters fed up with corrupt politicians.

Grillo's final election rally on Friday, in a large square in Rome traditionally associated with the left, was expected to be packed with supporters.

Bersani said he will follow the course set by Mario Monti, a former high-flying European commissioner roped in to replace the scandal-tainted Berlusconi who was forced to step down in November 2011.

But Bersani will come under immediate pressure to row back on austerity and do more to create jobs in an economy where an already record-high unemployment rate of 11.2 percent masks far higher joblessness among women and young people.

A Bersani victory is far from a certainty, mainly because of the rapid rise in the polls of Berlusconi, the irrepressible 76-year-old billionaire tycoon who is still in the game even after 20 tumultuous years in Italian politics.

This is the sixth election campaign for Berlusconi, who has been prime minister three times, has survived multiple court cases, sex scandals and diplomatic gaffes.

One recent poll said he was within 2.5 points of catching up with Bersani.

Berlusconi has pursued a populist campaign, intimating that Italy's social misery can be blamed on a "hegemonic" Germany imposing austerity.

Several polls indicate that Bersani may score only a half-victory by managing to secure a stable majority in the lower house of parliament, the Chamber of Deputies, but failing to get one in the upper house, the Senate.

An average of the most recent polls would give Bersani 34 percent, Berlusconi 30 percent, Grillo 17 percent and Monti around 11 percent of the vote.

Agence France-Presse